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2012 (8) TMI 418 - AT - Income TaxValidity of a decision where reasons are not recorded - held that - Recording of reasons is a part of fair procedure. Reasons are the harbinger between the mind of the maker of the decision in the controversy and the decision or conclusion arrived at. They substitute subjectivity with objectivity. Failure to give reasons amounts to denial of justice. - Decision of Apex court in Mangalore Ganesh Beedi Works Vs. CIT and another 2005 (1) TMI 15 - SUPREME COURT followed. Unaccounted scrap sales - alleged unaccounted scrap sales was found in the course of survey and the assessee could not produce any evidence for the argument that the same is included in the scrap sales already shown in the books of accounts Held that - One of the reasons for making the addition was that the assessee did not furnish any evidence to substantiate its claim that the income had already been offered to tax in the earlier years - it is not clear as to whether the earlier record which was available with the AO had been considered while taking a view that no evidence was produced by the assessee - issue back to the file of the Assessing Officer for fresh adjudication Disallowance of the travelling expenses incurred by the wife of Managing Director - AO made the disallowance by observing that the directors and their spouses travelled abroad and that travel was personal in nature - claim of the assessee is that the director of the company travelled for business purposes and his wife accompanied him Held that - Facts are not clear as to whether the director traveled for the business purposes - issue is remanded back to the Assessing Officer for fresh adjudication in accordance with the law, after providing due and reasonable opportunity of being heard to the assessee. Capital gains on the transfer of immovable property - possession of the land is not given as per the terms of agreement and will be handed over to the developer only after completion of the work Held that - claim of the assessee was that amount was received as an advance, would be offered for taxation when the sale deed gets executed - nothing is brought on record to suggest that M/s. IDEB had taken possession of the property either physically or constructively - matter remanded back to the file of the Assessing Officer for fresh adjudication
Issues Involved:
1. Deletion of addition made on account of unaccounted scrap sales. 2. Disallowance of traveling expenses incurred by the wife of the Managing Director. 3. Computation of capital gains on the transfer of immovable property to M/s. Gopalan Enterprises. 4. Computation of capital gains in respect of the alleged transaction with M/s. IDEB. Detailed Analysis: 1. Deletion of Addition on Account of Unaccounted Scrap Sales: The department's appeal contended that the CIT(A) erred in deleting Rs. 10,00,000 out of Rs. 25,76,253 added by the AO for unaccounted scrap sales. The AO found discrepancies during a survey and added Rs. 25,76,253 as unexplained income. The CIT(A) reduced this to Rs. 15,76,253, accepting the assessee's claim that Rs. 10,00,000 was already accounted for. However, the Tribunal noted that the CIT(A)'s order lacked reasoning and was a non-speaking order. It emphasized the necessity for reasoned judgments and remanded the issue back to the AO for fresh adjudication, ensuring due consideration of the assessee's evidence and arguments. 2. Disallowance of Traveling Expenses Incurred by the Wife of the Managing Director: The assessee's appeal challenged the disallowance of Rs. 1,68,371 for traveling expenses incurred by the wife of the Managing Director. The AO disallowed the expenses, deeming them personal. The CIT(A) upheld this, stating the expenses were not for business purposes. The Tribunal referenced its previous decision in the assessee's own case, which remanded the issue for fresh adjudication, emphasizing the need for clear facts and proper examination of whether the travel was indeed for business purposes. The Tribunal followed this precedent and remanded the issue back to the AO for fresh adjudication. 3. Computation of Capital Gains on Transfer of Property to M/s. Gopalan Enterprises: The assessee disputed the AO's computation of capital gains at Rs. 10,55,31,547 instead of Rs. 5,55,31,547. The AO considered Rs. 5 crores received for land development as part of the sale consideration. The CIT(A) upheld this, doubting the plausibility of the claimed development expenses. The Tribunal noted the AO's failure to verify the expenses and the CIT(A)'s lack of reasoning. It remanded the issue back to the AO for fresh adjudication, directing a proper examination of the development expenses and the agreement's terms. 4. Computation of Capital Gains in Respect of Alleged Transaction with M/s. IDEB: The AO taxed capital gains of Rs. 43,61,72,341 based on agreements with M/s. IDEB, considering the transaction as a transfer under Section 2(47)(v) of the Act. The assessee argued that the agreements were not acted upon and possession was not transferred. The CIT(A) upheld the AO's view, interpreting the agreements as indicative of transfer. The Tribunal found the facts unclear, particularly regarding possession and the status of the agreements. It remanded the issue back to the AO for fresh adjudication, emphasizing the need to verify whether possession was transferred and the agreements were acted upon. Conclusion: The Tribunal allowed both the department's and the assessee's appeals for statistical purposes, remanding all issues back to the AO for fresh adjudication, ensuring due consideration of the evidence, proper reasoning, and adherence to legal principles.
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